Identifier
Created
Classification
Origin
09ASMARA173
2009-06-08 14:53:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Asmara
Cable title:  

MINING FIRMS SEEK "FLAGSHIP" LICENSE IN GOLD

Tags:  EMIN PGOV ER 
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INFO RUCNIAD/IGAD COLLECTIVE
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UNCLAS ASMARA 000173 

SENSITIVE
SIPDIS

LONDON AND PARIS FOR AFRICA WATCHERS
DEPT FOR AF/E and EEB/CIP/BA

E.O. 12958: N/A
TAGS: EMIN PGOV ER
SUBJECT: MINING FIRMS SEEK "FLAGSHIP" LICENSE IN GOLD

REF: ASMARA 168

UNCLAS ASMARA 000173

SENSITIVE
SIPDIS

LONDON AND PARIS FOR AFRICA WATCHERS
DEPT FOR AF/E and EEB/CIP/BA

E.O. 12958: N/A
TAGS: EMIN PGOV ER
SUBJECT: MINING FIRMS SEEK "FLAGSHIP" LICENSE IN GOLD

REF: ASMARA 168


1. (SBU) Chalice Gold Mines will likely purchase Sub-Sahara mining
as its flagship gold mining operation, according to a representative
from Sub-Sahara. Sub-Sahara, the Australian company that owns the
coveted license to the gold strip in Eritrea's Zara region, is
jointly owned by Australian-based Dragon Mining (which owns 20%) and
Africa Wide (owning 11%); Sub-Sahara owns the remaining 69%. Africa
Wide is considered "dead weight" in the mining community and will
likely be part of Chalice's purchase, bringing the Sub-Sahara total
ownership to 80%. The Eritrean government (GSE) currently owns 10%
of the profit off the top, with a contractual right to purchase an
additional 30%, if it has the funds to do so. This would leave
Sub-Sahara/Chalice with anywhere from 72% to 48% of the profit after
the GSE takes its share.


2. (SBU) Mining companies across the world are either shutting down
or scaling back on exploration, according to Sub-Sahara. The four
major mining firms in Eritrea (Sub-Sahara, Nevsun, Sunridge, and
Sanu Resources) have all had to scale back on international staff
and exploration efforts over the past several months due to economic
downturns. The one field that remains open for business, however,
is gold. Every company is looking for a flagship gold project that
will potentially last through the global economic recession.
Existing gold explorations are looking for financiers to help bring
them through the production stage. There is enough potential in the
Zara mines that Sub-Sahara may serve as Chalice's flagship project.
Although the acquisition is not complete, Chalice has already
provided Sub-Sahara with a $500,000 soft loan to complete its
feasibility study, which must be finished by May 2010 per the GSE's
orders.


3. (SBU) The new mining licenses recently granted by the GSE
(reftel) will increase the mining sector's visibility, according to
Sub-Sahara, and will attract more much-needed financiers in the
unstable mining market. Although not all the new licenses are for
gold, he continued, every new license is an opportunity to put
Eritrea on the radar for a larger company, which means more
investment potential for Sub-Sahara.
TABLER-STONE